February 28, 2013

PYLE: Sequestration Crisis Presents Energy Opportunity

February 28, 2013

WASHINGTON D.C. — IER President Thomas Pyle published an opinion editorial in U.S. News and World Report today arguing that the real concern about the coming sequester is not about the size of the cuts to take effect, but rather about the way Washington bureaucrats will use it to advance a political agenda. By contrast, the administration could use the opportunity of mandatory budget cuts to adopt a new policy for energy development on federal lands. The result: as much as $80 billion in annual revenues to the federal treasury.

Some Washington policymakers are quivering over the fact that the sequester is scheduled to take effect on Friday, though the most disconcerting thing about the coming spending cuts has little to do with the size of the cuts themselves. In truth, the coming sequester doesn’t cut spending. It only keeps spending increases down to $15 billion more than last year.

No, the real concern about the sequester has more to do with the way the administration will use it—and we all know how the White House hates to waste a crisis to advance its political agenda. Outgoing Interior Secretary Ken Salazar, for instance, is warning that the sequester will delay oil and natural gas permitting on federal lands and waters.

What Secretary Salazar doesn’t want you to know is that under his leadership the administration has already pursued a policy of slow-walking drilling permits, with results borne out in record high gas prices and lost job creation everywhere. In 2005, it took the federal government 154 days to process a permit to drill for oil or gas on federal lands. By 2012, it took 307 days on average for Interior to process a permit to drill—nearly twice as long. By comparison, it takes merely 10 days to receive a permit to drill in North Dakota and 27 days in Colorado.

The numbers speak for themselves. In North Dakota, economic prosperity has followed sensible regulatory policies. Unemployment is at 3.2 percent, the lowest in the nation, and the state is growing at a breakneck pace. Colorado ranks seventh in the nation in overall energy production, thanks in large part to the oil shale boom. Like other resource-rich states, North Dakota and Colorado understand their unique geography better than regulators in Washington. This allows the states to create a regulatory framework that protects its environment and also allows for robust energy development. In contrast, Americans dealing with Secretary Salazar’s Interior Department are met with roadblocks, red tape, and the run-around.

If sequestration is as bad as Obama administration officials predict, it makes sense to expedite, not further delay, oil and gas permitting on federal lands. Every dollar Interior spends administering the onshore oil and gas program on federal lands generates $66 in revenue to the federal government, according to the Western Energy Alliance. That’s a remarkable return on investment.

Expanding oil and natural gas exploration on federal lands makes good economic sense. A recent study by Dr. Joseph Mason of Louisiana State University estimates that opening up federal lands to oil and gas production would create 500,000 jobs a year and generate $30 billion a year in revenue for the next seven years and 2 million jobs a year and $80 billion a year in revenue over the next 30 years.

During his the State of the Union address last month, Obama vowed to “keep cutting red tape and speeding up new oil and gas permits.” He said this, of course, in full knowledge of the pending sequester. Perhaps Ken Salazar didn’t get the memo.

As sequestration draws near, the White House has an opportunity to dispense with the politics of fear and make good on its promise to produce more reliable, affordable energy. A good place to start would be expediting, not road-blocking, energy development on federal lands and waters.